Value-Based Care News

Studies: Hospital Consolidations Cut Competition, Raise Prices

By Jennifer Bresnick

Less competition among providers can lead to higher prices for patients, but access to transparent cost data allows patients to make better choices for themselves.

- Competition for patients in a local region and the availability of public data on quality and price comparisons keep the cost of healthcare down, state a pair of studies published in JAMA today, indicating that healthcare works little differently than any other industry where monopolies are associated with price gouging.  With the rise in hospital consolidations creating systems that cover massive geographical areas while reducing patient choice, the studies highlights the pressing need for transparent data on the costs of care as patients become increasingly responsible for out-of-pocket payments.

In the first study, researchers at Stanford University examined the relationship between physician competition and prices for certain common healthcare services.  Using Medicare data and the Hirschman-Herfindahl Index (HHI) to measure the competition in 1058 US counties, they found a direct correlation between high HHI scores, which indicate less competition, and extremely high prices paid by private PPO health plans for office visits.  In the top ten percent of least competitive areas, health plans paid up to $11.67 more for the same services than they did in the most competitive regions of the country.

“The research comes out of trying to understand some dramatic changes that have occurred in the health-care system over a couple of decades,” said Laurence Baker, PhD, professor of health research and policy at Stanford, who was the lead author on the study. “It’s an important question for the U.S. health-care system right now.  If we move toward larger practices, how can we get the benefits but avoid the challenges higher prices would create?”

A second report in JAMA, conducted by researchers from Castlight Health, Stanford, UC Berkeley, and the University of Southern California, investigated the impact of an employer-sponsored price transparency platform that allowed patients to search for services prior to receiving them.  They found that when patients made more informed choices, their relative claims payments dropped by 13.93% for laboratory tests and 13.15% for advanced imaging studies.

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  • “Use of price transparency information was associated with lower total claims payments for common medical services,” the study says. “The magnitude of the difference was largest for advanced imaging services ($124.74 less) and smallest for clinical office visits ($1.18 less). Patient access to pricing information before obtaining clinical services may result in lower overall payments made for clinical care.”

    The research may point to the need for local authorities to pay closer attention to how healthcare systems are partnering, merging, or consolidating in order to maintain a free market environment for patients.  While the shift to pay-for-performance reimbursements is intended to reduce costs across all types of service environments by rewarding quality over volume, patients with increasingly large deductibles are still facing heavy costs that can lead them to delay or avoid contact with the healthcare system.

    “Sometimes it can be tempting to say our goals for the health-care system should be only about taking care of patients and doing it as well as possible — we don’t want to worry about the economics,” said Baker. “But the truth is we do have to worry about the prices because the bill does come even if you wish it wouldn’t.”